Everything you need to know about offshoring: part one

How is offshoring disrupting business today?

Everybody’s talking about offshoring lately. And with good reason; it’s one of the most exciting opportunities in the market, and it’s disrupting businesses at every level.

Here are some ways you can use offshoring to disrupt your industry:

• You can cut costs significantly
• You can grow your team and scale faster
• You can remain competitive in a globalized market, and offer more affordable pricing to your customers
• You can compete in a bigger playing field if you’re a small-medium business
• And no matter how big or small you are, you can improve efficiencies and increase your profit.

If offshoring is an appropriate model for your business (and yes, it’s still an ‘if’ - Chapter 2 will help you decide), the best time to start offshoring is right now. While many savvy businesses have already adopted the model, we’re still in the early days. You’re ideally positioned to join the disruption and get the benefits (before your competitors do).

The mindset you need to offshore successfully

Let’s bust a myth. We often hear people talk about offshoring as unethical. That we should only employ locally and support local people. But the world has changed a lot in the last decade - even in the last few months. It’s time to face facts. We are in a global marketplace, and if you want to support locals, the best way you can do it is to build a thriving business. Because a failed business helps no one. Offshoring will ensure you are sustainable in the long-run. And your company’s continual growth will inevitably lead to more onshore jobs and opportunities within your home country too.

The four different offshoring models

Typically, when someone says “offshoring”, they mean one of four things:

• Project-based outsourcing - paying an overseas freelancer to complete a project.
• Traditional outsourcing (aka Business Process Outsourcing/BPO) - paying an overseas company to handle absolutely everything (and relinquishing all control of your business processes).
• Incorporating your company offshore - setting up an overseas division of your company, and handling facilities, recruitment, HR and payroll yourself, as well as day-to-day quality and productivity.
• Managed offshoring - setting up an overseas division of your company and getting a local specialist to handlefacilities, recruitment and HR, while you handle quality and productivity.

The pros and cons of the four offshoring models

It’s easy to get confused when you hear the word, “offshoring”. That’s because, although the practice itself has evolved a lot over the past decade, the language we use to describe it hasn’t. As a result, all the different offshoring approaches tend to get mixed in together.

So, when someone says, “Oh, outsourcing… tried it… it didn’t work for me,” what they’re really saying is, “The type of outsourcing we tried wasn’t right for my needs.”

The reality is, there are four distinct offshoring models, and they couldn’t be more different from each other. And understanding them is key to choosing the right one for your business (or making the informed decision not to offshore at all).

Which one - if any - is right for your business? Let’s explore the models in more detail.

MODEL 1

Project-based outsourcing

This is where you pay a freelancer overseas to complete a project for you.

You might use this offshoring model if you’re working with a limited budget, because an overseas contractor can be significantly more affordable than their local counterparts with the same skills.

The key thing to note here is that your freelancer is not full- time or dedicated to your business. While they complete your projects or retainer work, they’ll also work for other businesses and projects. Think of them as an overseas contractor.

For example:

• Hiring a designer on Upwork or Fiverr to design a logo
• Engaging a Russian web designer in to create a website
• Paying an Indian writer to write hundreds of blog posts for SEO.

MODEL 2

Traditional outsourcing (Business Process Outsourcing/BPO)

Traditional outsourcing is when you pay a provider to do absolutely everything. They recruit and manage your employees, handle all facilities and infrastructure, and manage business processes, productivity and work quality.

In other words, you hand over the keys and tell your BPO to drive the whole thing.

For example:

• You might ask a BPO to provide an end-to-end call center service, including staff, facilities and all business processes.
• You typically wouldn’t visit your BPO’s premises, or ever have any direct contact with your offshore team.

MODEL 3

Incorporating your business offshore

This is where you physically go to another country yourself, and incorporate a company to function as an offshore division of your business. Where you do all the setup, yourself, including incorporation, facilities, security, infrastructure, telecommunications, recruitment, HR and payroll. Plus you manage day-to-day work quality and productivity.

This model of offshoring involves:

• Creating your own incorporated company in another country
• Paying tax in that country
• Finding an office
• Setting up computers, internet access, phones, furniture, etc.
• Researching and abiding by local labor laws
• Recruiting qualified staff members for each position.

With this approach to offshoring, you’re responsible for every element of hiring, managing, and running your business. Just as you are with your onshore team.

For example:

• You open an office in India and hire team members to handle your incoming inquiries
• You might visit your offshore division for 3-6 months to recruit your support staff and get your office infrastructure set up, then head home and manage the operations from there.

MODEL 4

Managed offshoring

This is where you set up a dedicated team overseas, where labor is up to 70% cheaper. But you get a local specialist to handle facilities, recruitment, HR, IT support, legal knowledge and infrastructure, so you can focus on what you’re good at: day-to-day work quality and productivity.

You retain full control of your business processes, and fully integrate your offshore team into your business. Much as you manage your existing onshore team. Managed offshoring means you get an experienced partner on the ground to handle basically everything your offshore team needs. And you supply the systems and processes to ensure high quality work and productivity. It’s up to you how you manage your offshore team.

This is the model that MicroSourcing uses.

For example:

• Instead of handling customer service calls in your Sydney office, you engage your partner to employ a dedicated, full-time customer service team in the Philippines. Your team works on your set tasks and outcomes in the partner’s facilities, which are dedicated entirely to your organization.

Which one is right for you?

What to consider when choosing the right model for you:

• Whether you’re planning to outsource a project or an ongoing task/process
• Whether you need full-time, part-time or freelance contract staff
• Whether you need local knowledge or access
• The level of skills and experience you need
• What type of infrastructure and resources you can provide
• How you plan to task and manage your team, and how they’ll interact and connect with your onshore team
• How much (and on what basis) you plan to pay your outsourced team members, whether it’s per project or per hour.

While most businesses can benefit from some kind of offshoring, it’s definitely not the right model for every business. There are potential savings and benefits, but you need to commit time and effort to making it work. You need systems and processes so your offshore team can confidently work in your business. And you need to make sure your business is a good fit for the model.

If you only need work for projects here and there, or you only need someone to work part-time for you, you don’t need a dedicated offshore team. At least, not yet. But if you need full-time, dedicated staff and want to partner with a trusted partner on the ground, it’ll be one of the best things you do for your business

Save more by being smart about labor costs

A smart way to increase profits in your business is to cut your expenses in a way that won’t negatively impact your revenue. So look at your numbers. Find out exactly how your business is performing and what your biggest expenses are. If you’re like most businesses, you’ll already know, without looking, that your biggest expense is labor.

In the past, it was difficult to save on labor without potentially impacting your revenue or the effectiveness of your business. Just a few years ago, there wasn’t a lot you could do, aside from better management, productivity and tools.

But offshoring has opened up an exciting new opportunity for many businesses to significantly lower their labor costs, without losing skills or impacting quality.

Reduce your fixed costs

No doubt you’ve already noticed another way offshoring can save you money: by reducing your onshore fixed costs. A lot of business owners take fixed costs (like rent, facilities, electricity, and so on) for granted. But these costs definitely matter, especially if you’re trying to scale your business.

For example, if you were going to double your team onshore, you might expect your rent, IT infrastructure, and other costs to double. But if you doubled your workforce by instead going offshore, your onshore costs would stay the same. This difference to your bottom line really makes an impact.

What you could invest your savings into

If you could save thousands in your business every month by offshoring, what could you do with the funds instead?

• More marketing?
• More sales staff, sales training, and high-end software?
• Investing in partnerships?
• Going on roadshows?
• Investing in product research or service development?

Investing in any of these areas is likely to generate more growth in your business. And the best part is, with an offshoring strategy in place, you’ll be well positioned to scale your business to meet that demand.

How will you do things differently?

When you start offshoring, it represents an opportunity to do things differently in your business. You’ve freed up some time and funds, and it’s up to you what you do with it. You might:

• Pass on the savings and offer highly competitive rates to your customers
• Use the extra time and human resources to level up your customer experience
• Use the extra time to develop new products and offers or break into new markets.

Just ask yourself, “How can I use offshoring to disrupt my industry, be more competitive, improve experiences for clients and add value, all without losing revenue?”

Early adopters will reap the most benefits

Offshoring has only really been around for 5-10 years, so it’s still a relatively new opportunity that most businesses haven’t yet taken advantage of. It started with big telcos and insurance companies relocating their IT departments overseas. But it’s only now, in the last few years, that small to medium sized businesses have had access to the same tools and resources, and offshoring has become a viable option for companies of any size.

So, we’re in an exciting time. And there are still plenty of opportunities to be an early adopter and reap the benefits for your business.

If you’re savvy, you can now use the same software and leverage the same lower cost resources as some of the biggest companies in the world. But you can do it better - because as a smaller business, you’re smart, agile and can respond to change very quickly.

You need to make sure your business is sustainable now - and into the future. The businesses that are early adopters and do it well, will be the ones to reap the most benefits. Disrupt or be disrupted. It’s up to you.

How to identify opportunities to offshore

What most people don’t realize is that you can offshore nearly any type of role, as long as it doesn’t require localized knowledge or a physical presence onshore (here at home). If you have systems and processes in place, and the role can be done remotely/virtually, it can be offshored. And you can get highly skilled workers at a fraction of the price you’d have to pay their onshore counterparts.

Knowing that, you’re probably now starting to think about all the roles within your organization that could be outsourced. And all the labor costs you could be saving. So let’s get more specific.

How to identify opportunities to offshore

Here are the top 10 countries used for offshoring:

The Philippines has a very similar culture to the U.S.

Culturally, Filipinos are quite similar to Americans:

• They’re very loyal and honest
• They’re very accountable to their commitments
• Most speak fluent English
• They’re extremely hospitable
• And they tend to value their jobs highly (perhaps even more than most local employees).

What’s the tech like in the Philippines?

Many businesses are concerned about offshoring to the Philippines because they believe the technology won’t be up to the high standards of western countries. That’s a myth. In fact, the Philippines has very similar technology to the U.S.. The Filipino government invests heavily in infrastructure, particularly in the cities; Manila, for example, is home to a lot of large corporate facilities.

The main thing to be aware of when offshoring to the Philippines is the typhoons that come through every year. This can cause outages for businesses that aren’t prepared. When looking for an offshore partner, look for one who has invested in world-class redundancy infrastructure and business continuity processes - a partner who can quickly and affordably move teams and facilities to entirely different buildings if necessary. This means maximum uptime for business operations, even during natural disasters.

Tip 1: Offshoring is a time investment

Offshoring is an opportunity to expand your business faster and save on costs. But you’ll need to invest time up front to make it work. And it’s not a “set and forget” strategy. You’ll need to take the time to train, mentor, and speak with your offshore team on an ongoing basis, just like you do with your onshore team.

Tip 2: Treat your offshore team like your onshore team

Your offshore team are a part of your business. And they’re people, not robots. So, talk to them. On a practical level, this might involve scheduling daily Skype/ Hangouts/Chat sessions with your offshore team.

This will help your offshore team:

• Live and breathe your culture
• Align with your vision
• Work towards your company goals.

…just like your onshore team.

Tip 3: Dedicate an onshore ‘champion’ to manage the team

Your offshore team is a critical part of your business. So you have to make sure you equip them with the knowledge and understanding they’ll need to fill that role. The best way to do this is to dedicate an onshore champion, to manage and communicate with them. Your champion will be someone who:

• Has an intimate understanding of your business and culture
• Your offshore team can come to with questions
• Provides clarification and guidance to your offshore team
• Hosts regular meetings with your offshore team
• Checks in with individuals on your offshore team
• Is responsible for your offshore team’s performance
• Provides feedback and encouragement.

It’s not just about knowledge transfer, either. It’s also something of a cultural transfer. Your champion has to provide information and insight that your offshore team couldn’t get simply by reading your website.

When your onshore champion glues your two teams together, you’re far more likely to get the outcomes you want from offshoring. On the flip side, if you’ve got a disconnect, it can cause issues.

Tip 4: Visit your offshore team regularly

Visiting your offshore team and facilities is a must. We highly recommend you do it once when you first set up the team, then regularly after that.

Get on a plane, take a few days, walk through the facilities and talk to the people. When you do this, you and your team get to meet, in person, and really get to know each other properly. You, your business and your onshore team, as well as your goals and your customers, will become real things to your offshore team members. Not just abstract, remote concepts. This means your offshore team will truly understand who they’re working with, and why, and they’ll deliver much better service quality and results.

Similarly, your offshore premises and operations will become tangible to you, and your team members will become real individuals, with different strengths and weaknesses. So you’ll be able to see, first-hand, how it all comes together, and you’ll develop an excellent understanding of how you can best use the available resources to benefit your business.

Plus, while you’re visiting, chances are you’ll get to meet other business owners and managers who are offshoring too. This is obviously great from a networking point of view, but - more importantly - it’s a crucial confidence builder, enabling you to take the next step with complete peace of mind. Which is absolutely essential for creating and maintaining momentum in your business.

And, of course, the Philippines is a beautiful country. You might even be able to tack a mini island getaway on the end of your trip, so you can come back refreshed and ready with new ideas for your business. It’s only an added bonus, but it’s a very nice one.